Inflation rates have remained around 3%, but Federal Reserve Chair Jerome Powell indicates that the underlying dynamics are more complex and suggest a scenario closer to the central bank’s 2% target. During a recent post-decision press conference, Powell analyzed the September Consumer Price Index (CPI) report, pointing out that tariffs are primarily responsible for the persistent rise in goods prices, rather than widespread price pressures.
Powell remarked, “The September CPI report … was a little softer than expected,” highlighting that the increases in goods prices were primarily driven by tariffs. This contrasts sharply with a longer-term trend of mild deflation in the sector. He explained that while goods prices are climbing, the underlying inflation, when excluding tariff impacts, appears to be significantly lower and closer to the Fed’s target, estimating it to be around 2.3% to 2.4%.
On another important front, Powell noted that housing inflation, which has posed challenges for the Federal Reserve, is showing signs of sustained improvement. “The housing services inflation has been coming down and is expected to continue to come down,” he stated. He mentioned that the remaining challenge lies with services outside of housing, which have remained relatively stable over recent months.
Reiterating the Fed’s commitment, Powell said, “We’re absolutely committed to returning inflation to 2%.” He underscored the importance of credible long-term surveys and market pricing that reflect this commitment. “There should be no question that that’s where we’re going,” he asserted, reinforcing the central bank’s focus on achieving its inflation target.
